The railroad, which purchased the property last December, wants to sell 94 acres of the northern parcel and 53 acres to the south, but the 94 acres will only be on the market for 12 to 15 months. If it is not sold within that time frame, UP may move ahead with plans to put the property to rail-related use as originally conceived, said Aaron Hunt, spokesman for Union Pacific.

“Union Pacific is consistently analyzing its current and future business and recalibrating where necessary,” he said. “Though the parcel we own in Fremont would be conducive to a rail facility, we have no definitive plans to build a full-scale terminal at this time.”

Hunt declined comment on the asking price of the land.

Observers of the local real estate market estimate UP paid less than $100 million for the 167-acres, which it purchased from New United Motor Manufacturing Inc. NUMMI which shut down its operations at the plant in April 2010. It is now occupied by Tesla Motors.

City needs a buyer

Fremont city officials said this turn of events could open the door for a mixed-use development — office space and residential — along one of the busiest transportation corridors in Silicon Valley.

“This is great news for the city,” said Kelly Kline, Fremont’s economic development director. “It ensures that development of the land will complement what happens to other land surrounding the (future) Warm Springs BART station.”

Kline said in an effort to reach out to potential developers, a Request for Proposal has been issued for the 94 acres. She said city officials would like to see at least some Class A office space built on the site, since it’s in short supply in Fremont.

But it will take a major recovery in the local office market for Fremont to enjoy a Class A office space windfall, according to some observers. Drew Arvay, partner in the San Jose office of Cassidy Turley BT Commercial, said with 25 million square feet of office space still vacant throughout Silicon Valley, it will be a while before there will be construction of new space in the region. Even Fremont, which has a comparatively small 2 million square feet of office space, has a vacancy rate approaching 14 percent. By comparison, office space vacancy is about 8 percent in Mountain View and less than 6 percent in Cupertino, Arvay said. Vacancies exceed 23 percent in Fremont’s much-larger research and development category, he said.

“Smart companies are consolidating and looking for good deals on real estate, so things are getting better in some cases,” Arvay said. “But we’re not dancing in the streets yet. Not until the core (Silicon Valley) markets get tight will you see the outer markets pick up.”

Bigger plans for land

Robert Steinbock, senior vice president in the San Jose office of CB Richard Ellis, is the broker handling Union Pacific’s sale of the land, He declined to comment on most aspects of the sale, including the price.

“We will market the land to (potential) users and developers,” Steinbock said.

If all of the available land is eventually sold, Union Pacific will hold onto 20 acres around Tesla Motors. The electric car manufacturer bought the 5.4 million-square-foot NUMMI plant with the help of a $42 million in investment from Toyota Corp. last year. Union Pacific operates a freight line that runs through the 370-acre site.

City officials, most notably Mayor Bob Wasserman, expressed concern early this year that Union Pacific would use the land solely for its own business, overriding the city’s desire to add commercial and residential projects to the major transportation corridor east of Interstate 880. Wasserman did not return a message seeking comment on the possible sale of the UP land.

Kline said the city is proceeding with a study of development options for 800 acres surrounding the Warm Springs BART station, scheduled to open in 2014. The area includes the Tesla Motors plant and Union Pacific land.

The city is using a $330,000 federal grant to study development options for 800 acres surrounding the Warm Springs BART station, scheduled to open in 2014.

The project is part of the $2.1 billion, 10-mile Bay Area Rapid Transit district extension from the existing Fremont station to the Berryessa district of North San Jose, Kline said.

The city, with 214,000 residents, does have about 40 million square feet of industrial space.

“With BART coming to Warm Springs, this becomes the quintessential transit-oriented development,” she said. “We would like to see more Class A office space, more residential and amenities supporting the employment sector.”

Members of the Fremont City Council plan to discuss their survey of development potential for the area, called the South Fremont/Warm Springs Area Study, on Dec. 7.

David Goll can be reached at 408.299.1853 or dgoll@bizjournals.com.

David Goll covers health care, retail, nonprofits and education at the Business Journal. His phone number is 408.299.1853.

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